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Friday, November 8, 2013

Appraisal issues a never ending battle…

As much as the market has been straining to break out of the
recent recession and regain lost property values, one component of the market
has been acting as an anchor, holding back or at least significantly slowing
the positive progress. That component is the dreaded appraisal. I say dreaded,
because it has become the biggest obstacle to sales these days. The house can
be in move-in ready condition with a clean bill of health from the home
inspection and still have the sale

queered by a low appraisal. That’s happening
a lot these days. Why is that?

One of the constant battles that go on in the real estate
market is that between the Realtors involved in listing the houses and the
appraisers over what the market value of the house should be. Appraisals can be
the cold splash of reality in the face for many sellers. Appraisals take all of
the emotion out of the process of putting a market value on your property. The battle over market value is one that is
likely to continue forever, just due to the different natures of the two sides
in this argument.

Realtors, especially listing agents, tend to be optimistic
and they also tend to bake the direction of the market into their listing
pricing. In a rising market, like we have now, it is quite easy to miss the
market on pricing, either low or high. If the listing agent prices the property
too low, it might sell quickly; but, the seller will not have gotten the most
out or the sale. If, on the other hand, the listing agent is too aggressive
with pricing the property for a rising market, he may price it too high and it
will just sit there, waiting for the market to catch up.

Appraisers go at value pricing from a different perspective.
They are required to use sold comparable properties as a barometer of the
market; thus their data is always trailing the market, sometimes by as much as
6 months. In a rapidly rising market that almost always means that they miss
the value on the low side. For a long while appraisers were also forced to
include the sales of foreclosed and short sale properties in their comparable
properties. Fortunately much of that business is behind us now, but there are
still a few of those types of sales that were done in the last few months that
can affect appraisals.

Another major factor in many appraisals is something that
the seller can’t do anything about – the style of the house. House styles come
and go, with each decade usually having some dominant style. There are a few
“classic styles” – ranches and colonial, for instance, that never really go out
of style, but which might be less desirable than a more modern architectural
style. For the past couple of decades the 1 ½ -story or Cape Cod seems to be
the preferred style. Split levels, which were all the rage in the late sixties
and seventies, have really fallen out of favor as a style. Those style
preferences show up in the appraisals. Bi-levels, tri-levels and quads
definitely appraise lower than ranches, colonials and Cape Cods of the same
size. Homes that were sometimes classified as modern or contemporary when built
can also fall out of favor, since many of them have very unusual floor plans.

What can you do about all of this as a homeowner who wishes
to sell? Not much about the style issue; but you can make sure that your house
is the best one of whatever style that it is on the market. A house in great,
move-in ready condition will still attract buyers. Another thing that sellers
can do is to compose a list of the updates and upgrades that they have put into
the house, hopefully not too long ago. It is not obvious to the appraiser
exactly when the roof was replace or a new furnace put in, but those things
make a difference. Some updates, like granite counter tops will be obvious, but
many others may benefit from being pointed out for the appraiser. Taking care
of the many little “deferred maintenance” items that you may have been putting
off can also help by removing those value detractors.

Another thing to do is seek professional
advice. Get a good Realtor to do a Market Analysis for your home and then
follow his/her advice. You don’t need to fight with both the Realtor and the
appraiser. Call me and I’ll help you understand more about the market value of
your home and what you can do to improve it.

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About Me

I'm a pre-Baby Boomer who just happens to be into technology and the Web. I created and maintain 6 Web sites - three for real estate (see above for links), one for the Milford Historical Society, one for teh Milford Car Show and one for my church. I've been a Realtor for a little over 10 years.
Prior to selling real estate, I had a 30 year career selling and marketing computers and related software and services for a variety of IT industry companies, many of them now long gone - Burroughs, Digital Equipment, Compaq, HP, EMC and SGI. I still keep up with what's happening in that space.
Now, I focus upon real estate, with a specialty in historic houses in and around the Milford, Michigan area. I'm also focusing more andmore on the needs of aging home buyers, since that is a category into which I fall myself.
I hope that you enjoy reading my blog as much as I enjoy creating it. Feel free to let me know your opinions or to add your comments to mine. I also have another blog - normsmilfordblog.com that is a bit more unpredictable in its content. Try it if you haven't already.I'm also on activeRain, Facebook, Linked In and Twitter.